Religious Character of Trust Objects Cannot Alone Disqualify Section 80G Approval: ITAT Jaipur Examines Five Percent Expenditure Threshold

Case Background

Case Name: Badhamata Adhyatmik Evam Sanskrutik Seva Trust Vs Exemption Ward (ITAT Jaipur)
Appeal Number: ITA No: 745/JPR/2026
Date of Order: 08/10/2026
Assessment Year: 2025-26

Overview of the Dispute

The Badhamata Adhyatmik Evam Sanskrutik Seva Trust, located at Village Kanankheda, Tehsil Kapasan, District Chittorgarh, submitted an application in Form 10AB on 30 September 2025 seeking approval under Section 80G(5) of the Income Tax Act, 1961. The trust represented that it had maintained registration and approval under the Act on a continuing basis and was also enrolled with the Devasthan Department, Udaipur, with effect from 11.05.2011.

The trust's objectives spanned both religious and public welfare domains. On the religious side, they covered worship activities, management of temples, and organisation of festivals. On the charitable side, the objectives included construction and operation of a hospital, a goshala, dispensaries, diagnostic centres, first aid facilities, literacy promotion, blood donation, eye donation, and de-addiction programmes.

The Commissioner of Income Tax (Exemption) [CIT(E)], Jaipur, rejected the application vide order dated 29.01.2026, citing three grounds:

  1. The trust's objects were found to be religious in nature, placing the institution outside the scope of Section 80G(5) as read with Explanation 3.
  2. Expenditure recorded under heads such as Adhyatmik Karyakaram, Navratri, Gopashtami, and Satchandi Yadnya was characterised as religious, and held to exceed 5% of total income in violation of Section 80G(5B).
  3. The trust lacked a valid registration under Section 12A as on the date of the order, which was considered a prerequisite under Rule 11AA of the Income Tax Rules, 1962.

The trust challenged all three grounds before the Income Tax Appellate Tribunal (ITAT), Jaipur.

The ITAT framed three central questions for consideration:

  1. Whether the religious character of the trust's objects, by itself, was sufficient to exclude the institution from the benefit of Section 80G.
  2. Whether the expenditure incurred on religious activities had, in fact, exceeded the threshold prescribed under Section 80G(5B).
  3. What bearing the status of registration under Section 12A had on the application for approval.

Tribunal's Analysis

Statutory Framework: Section 80G(5) and Section 80G(5B)

Section 80G(5) of the Income Tax Act, 1961 makes the deduction for donations available only where the recipient institution is established in India for a charitable purpose and satisfies the prescribed conditions. Explanation 3 to Section 80G carves out purposes that are wholly or substantially wholly of a religious nature from the definition of "charitable purpose."

However, Section 80G(5B) introduces a critical qualification through a non obstante clause:

"(5B) Notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply."

This provision expressly overrides both clause (ii) of Section 80G(5) and Explanation 3. It statutorily contemplates that an institution may incur religious expenditure, and if such expenditure stays within the ceiling of 5% of total income in the relevant previous year, the institution is deemed eligible under Section 80G.